PR: The Perils of Inexperience

Over the past year, we have found an increasing number of complaints about the practice of Strategic Communications, which by our definition comprises virtually all communications disciplines, i.e. Public Relations, Corporate Communications, Investor Relations, Crisis Communications and so forth. They generally come from our newer clients who candidly have retained Stern And Company with some trepidation, as their experiences with Strategic Communications have yielded virtually no added value.

One of our newest clients told us that its previous firm netted it a single media placement in three years and that was on a web-based publication; and was rarely responsive to requests for tasks as elemental as simple editorial work. Now, that the client maintained its relationship is certainly on its side of the equation. That its firm drove unreasonable expectations and failed to deliver is typical of many agencies these days, not all, but many. Too often companies fall prey to what we view as rather outlandish claims of accomplishments by public relations agencies. And that’s what prompted this post. We recently had the occasion to attend one such agency’s website; an agency that according to its site worked with a dozen or so clients. It all seemed reasonable to us until we read the firm’s claims of accomplishments.

Among those claims, the agency said two of its clients remained listed on Nasdaq because the effected strategies the agency developed to keep the share price up. If one of the strategies was a reverse split, perhaps, but in these situations, reverse splits rarely hold and generally have an impact on other Nasdaq requirements. The fact of the matter is that strategies do not maintain shareholder value, fundamentals do that. And those fundamentals must be communicated strategically. Even then, with small cap companies, it is a remarkably challenging task to obtain sponsorship by institutional holders of quality, i.e. ones that will hold for the long term, rather than “flip” equities.

The firm also claimed that it placed on client on the American Stock Exchange. We’re wondering if the agency simply recommended the Amex, or actually filled out the listing forms and paid the fees. PR agencies do not place companies on exchanges; exchanges make those decisions.

Our favorite claim, however, is that the agency had media placements on Dow Jones and Reuters. We would hope so, as it would be an extraordinary challenge to miss the venues with disclosure releases, especially in light of the fact that both run at such high speeds they frequently need copy. At the end of the day, both generally run just about everything that material for any company down to the level of and including the Bulletin Board.

At the end of the day, there are few promises a public relations firm can keep:

The “enhancement of shareholder value,” a rather odd term of art meaning simply that a firm can raise the price of a client’s stock. There certainly are many ways an agency can try to prop up a stock price and fewer in which it can be successful. Most of those carry severe and serious penalties. What an agency can do is strategically communicate a client’s financial position and overall business strategy in a compelling manner to the financial community, among other key publics. If done with credibility and based in a solid strategy, this will provide a company with the best possible opportunity to have its stock recognized.

Stories in the media: Sure, anyone can place a story in the media. There are tens of thousands of outlets available. The task is not media placement, but strategic media placement, getting the right story in the right publication(s). While this takes certain skills, it requires more common sense and thought than anything else. If the news is a material disclosure, the course is clear; if it’s the promotion of the world’s greatest deli sandwich, chances are Compressed Air Quarterly is not the medium. Simply put, while many news releases can be widely disseminated, others do not require such a shotgun approach and, in fact, such an approach can actually diminish the chances for publication.

Getting listed on a stock exchange: Suffice it to say that this task is one for corporate securities attorneys and is solely up to the exchange. No agency can get a company listed.

There are many fine strategic communications firms and there are many that are not. It is caveat emptor for the prospective client. On this site, under Pages, please feel free to browse through some of Stern And Company’s essays on strategic communications methodology. We like to think that we are unique in the way we serve our clients, but in candor and fairness, a company seeking high level strategic communications should effect strong due diligence before committing to a firm, even Stern And Company.